It is a known fact that the success of any organization is solely dependent on the volume of business they do in a fiscal year along with how they were able to effectively manage risks arising from the contracts they have signed with their vendors, customers, partners, and employees
To start with, let’s understand the various ways an Enterprise can be exposed to potential risks regarding the contracts.
Unable to trace the signed contract on time
Contracts are managed by various stakeholders across the organization and several copies are rotated back and forth until the final contract is signed off by both parties. Most organizations that do not have a central repository of contract documents keep these signed contracts in several places that include Emails, Cloud storages like Google Drive, Dropbox, file cabinets in case of paper-based scanned documents, USB drives, and so on. When there is a contract breach or dispute it becomes humanly impossible to go over so many places and sniff through the contracts and get to the right one on time.
Auto-Renewal of a Vendor Agreement without notice
Every organization enters into agreements with the vendors from whom they take services. For various reasons, most of these vendor agreements have renewal terms in such a way that unless there is a prior written notice within X days of the agreement termination, the agreement that the organization has signed gets auto-renewed for another term. This can become a potential risk especially when the organization is not very happy with the services and wanted to terminate but has lost track of the agreement dates resulting in auto-renewal of the signed agreement.
Deviations from Standard Terms
Almost all organizations follow standard templates vetted by their legal when signing contracts with vendors and customers. However, in few cases depending on the other party terms organizations do accept reasonable deviations especially in cases like Payment Terms, Penalties, and Damages, etc. When there are many such contracts that are deviating from their standard templates it becomes unviable to keep track of such contracts and this can cause substantial risk to the organization especially when it comes to Penalties and Damages.
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- Beware of scammers, fraudsters, etc.
- You need to physically see and test items before purchase
- Never advance payment for anything. It is a sign of scam.